Saturday, May 15, 2010

Nutritious fruit - The Pineapple

Being a fan of fruit and its juice, et al, I've decided to start a series highlighting the nutritional properties of various fruits. Today, we'll start with one of my personal favorites: the pineapple.


Next to bananas, pineapple is the second most popular tropical fruit. It is native to South America particularly in Brazil and Paraguay. Pineapple is also known as Piña, Nanas and Ananas. It was Christopher Columbus who first introduced the fruit to Europe. Today, almost a third of the world's production and sixty percent of canned pineapple comes from Hawaii.

Other than Hawaii, other top producers of pineapple are: Costa Rica, Mexico, Honduras, South Africa, Taiwan, Dominican Republic, Ivory Coast, Côte d'Ivoire, Guinea, India, El Salvador, Ecuador, Nicaragua, Australia, Thailand, the Philippines and Martinique.

There are a few ways of propagating the pineapple plant: from seeds to using the suckers of mother plants that have already borne fruit. But the common and easiest way is to grow the plant from the crowns or tops of other pineapples. The crowns are planted in soil to grow new pineapple plant. It takes about 18 months from planting to harvesting to produce a ripe pineapple fruit. The pineapple fruit must be harvested just at the right time, once harvested, it softens as it ripens but it does not get any sweeter after it has been picked.

Pineapple Nutrition Fact
The pineapple fruit has vitamins, minerals, fiber and enzymes that are good for the digestive system and help in maintaining an ideal weight and balanced nutrition. Pineapples are a good source of Vitamin C and can be eaten raw or used in cooking. Pineapple has minimal fat and sodium with no-cholesterol.
Delicious, healthy and nutritious.

Chemical Composition of Pineapple

Ripe & Raw Pineapple
Per 100g
Per 100g
Total dietary fiber
Lipid Fat
Glucose (Dextrose)
Total sugars
86 g
49 kcal
205 kj
0.50 g
1.2 g
0.20 g
0.29 g
7 mg
7 mg
0.37 mg
1 mg
113 mg
14 mg
0.11 mg
1.65 mg
0.6 mcg
1.7 g
1.9 g
8 g
Ascorbic Acid (Vitamin C)
Vitamin B-12
Vitamin B-6
Vitamin A, IU
Vitamin A, RE/p>
Vitamin E
Vitamin K
Folate (total)
Folate, food
Folate, DFE
Pantothenic acid
Tocopherol, alpha

Beta Carotene
Alpha Carotene
Cryptoxanthin, beta
15 mg
0 mcg
0.09 mg
50 IU
3 mcg_RE
1.0 mg_ATE
0.7 mcg
11 mcg
11 mcg
11 mcg_DFE
0.09 ug
0.036 mg
0.42 mg
0.16 mg
0.10 mg

31 mcg
0 mcg
0 mcg

Pineapple Fruit Nutritional Value Based On Preparation
Serving SizeCarbsFiberFatEnergy
Raw Pineapple
1 slice,110g"2">9"2">2.5g0 g175 kj
Canned Pineapple, juice drained
1 cup, 205ml254 g0 g470 kj
Canned Pineapple in syrup, drained
1 slice, 40g80.5 g0 g140 kj
Canned & Crushed Pineapple in juice, drained
1 cup, 270g274.5 g0 g510 kj
Canned Pineapple Juice, unsweetened
0 g
0 g
465 kj

Pineapple Fruit Nutrition Fact
Serving Size: 2-3" diameter, 3/4" slices

Calories from fat

%Daily Value
Total Fat
   Saturated Fat
Cholesterol 0mg
Sodium 2mg
Total Carbohydrates 16g
   Dietary Fiber 2g
   Sugars 14g
   Protein 1g
Vitamin A
Vitamin C



*Based on a 2,000 calorie diet

Medicinal Properties of the Pineapple Fruit
Pineapple contains micro-nutrients that experts believe protect against cancer and these micro-nutrients also break up blood clots and are beneficial to the heart. The ripe pineapple has diuretic properties. Pineapple juices also kills intestinal worms. It also relieves intestinal disorders and soothes the bile. Pineapple juice contains chemicals that stimulate the kidneys and aid in removing toxic elements in the body.

Pineapple contains a mixture of enzymes called bromelain. Bromelain blocks the production of kinins that form when
there is inflammation. Tests have shown that this blocking property of Bromelain in pineapple helps reduce swelling brought about by arthritis, gout, sore throat and acute sinusitis. It also helps accelerate the healing of wounds due to injury or surgery. To help reduce inflammation, eat pineapple between meals. If eaten during or after meals, the enzymes will be utilized for digesting food.

Another massive spill...

...Threatens to engulf Arizona

Civil Asset Forfeitures: Not Just for Drug Crimes

Suit seeks to change law on civil asset forfeitures
May 12, 2010, 10:22PM

In a police parking lot in east Houston sits a red 2004 Chevy Silverado, oblivious to the fact it is being sued.

No longer just the bane of international drug kingpins, asset forfeiture laws can target money and property used in myriad crimes including, in this case, felony DWIs.

Now, a Washington, D.C. law firm and the American Civil Liberties Union want to use the lawsuit to change the laws governing civil asset forfeiture in Texas.

“Texas has some of the worst civil forfeiture laws in the country, and what's driving this is the fact that police and prosecutors get to keep the property they seize,” said Scott Bullock, an attorney with the Institute for Justice, a D.C.-based libertarian law firm studying civil forfeiture laws nationwide. “They can use it to buy better equipment, to buy better automobiles, even to pay salaries, and we feel is an untoward profit incentive.”

Legislators and Harris County prosecutors say forfeiture laws are fair and work.

“It's criminals paying for investigations and law enforcement,” said Karen Morris, chief of the Harris County District Attorney's civil asset forfeiture division. “It eases the burden on taxpayers.”

The truck in the middle of the dispute has gathered dust more than a year after being confiscated from Robert Faustino, a Houston man arrested, convicted and sentenced to six years in jail for driving while drunk.

Faustino agreed to buy the truck for $20,000 in 2004 from Zahar El-Ali, who said he still is owed $2,350. El-Ali wants the truck returned to him.

‘My truck doesn't drink'

The Harris County DA's office wants to sell the truck, pay El-Ali what he is owed — which it estimated at about $300 — and put the rest in its asset forfeiture fund to be used for law enforcement-related purposes.

Under state law, the seized property is sued. Anyone with an interest in it, like El-Ali, is a third-party claimant.

“Innocent owners like me should not have their property taken without being convicted of a crime,” El-Ali contended. “My truck doesn't drink. My truck didn't do anything wrong.”
Morris said El-Ali is not an “innocent owner.”

“He's a lien holder,” Morris said. “As a lien holder, his interests are absolutely protected. And he will get his $300.”

Typically, Morris said, if a seized vehicle is worth more than the loan, the vehicle is auctioned and the lien holder is paid first. If the vehicle is worth less than the loan, the lien holder can just get the vehicle back.

“There are two types of forfeiture,” she said. “Either you're doing it to deprive them of ill-gotten gains, or you're doing it to protect society. In this case, we're taking the truck from Mr. Faustino so he doesn't drive drunk again when he gets out of jail.”
Call for accountability

Representatives for the Institute of Justice have filed arguments challenging the constitutionality of the law.

“The goals in this case are to get Mr. El-Ali's truck back and to change Texas law to better protect property owners,” Bullock explained.

The ACLU also takes issue with the law, arguing that there are not enough checks or accountability in the system, said Vanita Gupta, director of the national ACLU's Center for Justice

“The concern that we have about civil asset forfeiture laws generally, and in Texas specifically, is that they sort of lend themselves to the likelihood of abuse,” Gupta said. “The barriers for a victim of asset forfeiture to actually be able to establish that he or she is the rightful owner of legitimately obtained money are so incredibly high. The money is too easy for law enforcement.”

Abuses elsewhere

Forfeiture laws in Texas and across the country have come under fire from several angles, including the Legislature, after abuses in other parts of Texas surfaced.

Despite cases of abuse, State Sen. John Whitmire, who chairs the Senate Criminal Justice Committee, said the law is sound policy.

Whitmire authored a bill during the last session that would have limited some of law enforcement's powers in forfeiture cases. The measure died in the House.

Morris said the Harris County District Attorney's office worked with Whitmire on changing the law, and does not oppose increased regulations.

She said her division files more than 80 such cases a month and typically takes in between $6 million and $8 million a year, mostly money tracked to drug transactions. Last year, a single stock fraud case boosted the amount to a total of $12 million.

U.S. State Department to aggressively confront GMO critics

U.S. State Department to aggressively confront GMO critics
Published on 05-14-2010

When the Biotechnology Industry Organization (BIO) met in Chicago last week they were, no doubt, elated to hear that the U.S. State Department would be aggressively confronting critics of agricultural biotechnology.

Wouldn't you think the State Department might have more pressing issues than carrying water for Monsanto and the rest of the biotechnology industry?

Jose Fernandez, Assistant Secretary of State for the Bureau of Economic, Energy and Business Affairs noted that the State Department was ready to take on the naysayers. In addition to confronting the critics, Fernandez stated they would be building alliances (presumably with the biotech industry and foreign governments), anticipating roadblocks to acceptance and highlighting the science.

Highlighting the science, that's rich, to this point the only “science” they can highlight is the fact that nearly 100% of the commercially available genetically modified (GM) crops worldwide are engineered to be insecticidal, resistant to herbicide application, or both.

The State Department and its allies promote GM as a way for the developing world to feed itself, but the four predominant GM crops (corn, soy, cotton and canola) are not specifically human food crops, they are used for animal feed, biofuel, fiber and processed food.

They would like us to believe that the “science” will deliver more nutritious food, higher yielding crops, drought resistant crops and an end to world hunger. These claims however, are not based in science, but only on “ the promise”, or “the hope” of GM doing what its supporters claim it can do.

The science, or lack thereof, that we should take note of is the glaring lack of regulation of GM crops and the serious questions about their safety. Nina Fedoroff, Science and Technology Adviser to Secretary of State Hillary Clinton noted “We preach to the world about science-based regulations but really our regulations on crop biotechnology are not yet science-based.”

We should not be surprised that the U.S. State Department is again, on the stump, promoting biotech crops. It would be difficult to say how long the the U.S. government has been aggressively promoting biotechnology, specifically GM crops, but certainly since the commercialization of GM soy in 1996.

In 2004 the State Department launched a website which was part of a State Department initiative to “encourage broader adoption and acceptance of biotechnology in the developing world”, according to Deborah Malac, then chief of the Biotechnology and Textile Trade Policy Division of the State Department.

USDA is also actively promoting biotechnology with a website that supports bringing biotechnology to the “worldwide marketplace”.

Even the U.S. Senate is getting into the act, promoting, even mandating GM technology to the developing world. Senate Bill 384, The Global Food Security Act, would amend the Foreign Assistance act of 1961 to read “Agricultural research carried out under this act shall include research on biotechnological advances appropriate to local ecological conditions, including GM technology”.

While USDA assures us that the products of biotechnology and the chemicals they depend on are safe, scientists within USDA, the State Department and the Administration question that view.

So why does the U.S. government promote the interests of the biotechnology industry over the best interests of peoples health, the environment and the food security of the developing world?

Easy answer, the biotechnology industry has a high profit margin and they know how to influence government policy.

Jim Goodman is a dairy farmer from Wonewoc WI and a 2008-2009 IATP Food and Society Fellow.

Obama wants to fund Israel's missile system

Published on 05-14-2010
Source: Press TV

US President Barack Obama wants Congress to pay Israel more than $200 million to fund a new missile system, the White House spokesman says.

Obama has asked Congress to approve the aid so that Israel could deploy a controversial missile system called the "Iron Dome."

White House spokesman Tommy Vietor said on Thursday that Washington recognizes the need for Israel to have such a system.

Israel has completed tests in January on the short-range anti-missile system which is designed to intercept rockets and artillery shells.

"As the president has repeatedly said, our commitment to Israel's security is unshakable and our defense relationship is stronger than ever," said Vietor.

Trillions More Than We've Been Told...

The Bailout of Big American Banks Has Cost Trillions More Than We've Been Told
Published on 05-14-2010

Granted, the $700 billion dollar TARP bailout was a massive bait-and-switch. The government said it was doing it to soak up toxic assets, and then switched to saying it was needed to free up lending. It didn't do that either. Indeed, the Fed doesn't wantthe banks to lend.
True, as I wrote in March 2009:
The bailout money is just going to line the pockets of the wealthy, instead of helping to stabilize the economy or even the companies receiving the bailouts:
  • A lot of the bailout money is going to the failing companies'shareholders
  • Indeed, a leading progressive economist says that the true purpose of the bank rescue plans is "a massive redistribution of wealth to the bank shareholders and their top executives"
  • The Treasury Department encouraged banks to use the bailout money to buy their competitors, and pushed through an amendment to the tax laws which rewards mergers in the banking industry (this has caused a lot of companies to bite off more than they can chew, destabilizing the acquiring companies)
And as the New York Times notes, "Tens of billions of [bailout] dollars have merely passed through A.I.G. to its derivatives trading partners".


In other words, through a little game-playing by the Fed, taxpayer money is going straight into the pockets of investors in AIG's credit default swaps and is not even really stabilizing AIG.
But the TARP bailout is peanuts compared to the numerous other bailouts the government has given to the giant banks.

And I'm not referring to the $23 trillion in bailouts, loans, guarantees and other known shenanigans that the special inspector general for the TARP program mentions. I'm talking about more covert types of bailouts.

Like what?

Guaranteeing a Fat Spread on Interest Rates
Well, as Bloomberg notes:

“The trading profits of the Street is just another way of measuring the subsidy the Fed is giving to the banks, said Christopher Whalen, managing director of Torrance, California-based Institutional Risk Analytics. “It’s a transfer from savers to banks.” 
The trading results, which helped the banks report higher quarterly profit than analysts estimated even as unemployment stagnated at a 27-year high, came with a big assist from the Federal Reserve. The U.S. central bank helped lenders by holding short-term borrowing costs near zero, giving them a chance to profit by carrying even 10-year government notes that yielded an average of 3.70 percent last quarter. 
The gap between short-term interest rates, such as what banks may pay to borrow in interbank markets or on savings accounts, and longer-term rates, known as the yield curve, has been at record levels. The difference between yields on 2- and 10-year Treasuries yesterday touched 2.71 percentage points, near the all-time high of 2.94 percentage points set Feb. 18.
Harry Blodget explains:
The latest quarterly reports from the big Wall Street banks revealed a startling fact: None of the big four banks had a single day in the quarter in which they lost money trading.
For the 63 straight trading days in Q1, in other words, Goldman Sachs (GS), JP Morgan (JPM), Bank of America (BAC), and Citigroup (C) made money trading for their own accounts.
Trading, of course, is supposed to be a risky business: You win some, you lose some. That's how traders justify their gargantuan bonuses--their jobs are so risky that they deserve to be paid millions for protecting their firms' precious capital. (Of course, the only thing that happens if traders fail to protect that capital is that taxpayers bail out the bank and the traders are paid huge "retention" bonuses to prevent them from leaving to trade somewhere else, but that's a different story). 
But these days, trading isn't risky at all. In fact, it's safer than walking down the street.
Because the US government is lending money to the big banks at near-zero interest rates. And the banks are then turning around and lending that money back to the US government at 3%-4% interest rates, making 3%+ on the spread. What's more, the banks are leveraging this trade, borrowing at least $10 for every $1 of equity capital they have, to increase the size of their bets. Which means the banks can turn relatively small amounts of equity into huge profits--by borrowing from the taxpayer and then lending back to the taxpayer. 
The government's zero-interest-rate policy, in other words, is the biggest Wall Street subsidy yet. So far, it has done little to increase the supply of credit in the real economy. But it has hosed responsible people who lived within their means and are now earning next-to-nothing on their savings. It has also allowed the big Wall Street banks to print money to offset all the dumb bets that brought the financial system to the brink of collapse two years ago. And it has fattened Wall Street bonus pools to record levels again.
Paul Abrams chimes in:
To get a clear picture of what is going on here, ignore the intermediate steps (borrowing money from the fed, investing in Treasuries), as they are riskless, and it immediately becomes clear that this is merely a direct payment from the Fed to the banking executives...for nothing. No nifty new tech product has been created. No illness has been treated. No teacher has figured out how to get a third-grader to understand fractions. No singer's voice has entertained a packed stadium. No batter has hit a walk-off double. No "risk"has even been "managed", the current mantra for what big banks do that is so goddamned important that it is doing "god's work". 
Nor has any credit been extended to allow the real value-producers to meet payroll, to reserve a stadium, to purchase capital equipment, to hire employees. Nothing.
Congress should put an immediate halt to this practice. Banks should have to show that the money they are borrowing from the Fed is to provide credit to businesses, or consumers, or homeowners. Not a penny should be allowed to be used to purchase Treasuries. Otherwise, the Fed window should be slammed shut on their manicured fingers.
And, stiff criminal penalties should be enacted for those banks that mislead the Fed about the destination of the money they are borrowing. Bernie Madoff needs company.
There is another type of guaranteed spread that allows the giant banks to make money hand over fist. Specifically, the Fed pays the big banks interest to borrow money at no interest and then keep money parked at the Fed itself. (The Fed is intentionally doing this for the express purpose of preventing too much money from being lent out to Main Street. That's just dandy.)

The giant banks are receiving many other covert bailouts and subsidies as well.

Too Big As Subsidy
Initially, the fact that the giant banks are "too big to fail" encourages them to take huge, risky gambles that they would not otherwise take. If they win, they make bigbucks. If they lose, they know the government will just bail them out. This is a gambling subsidy.

The very size of the too big to fails also decreases the ability of the smaller banks to compete. And - since the government itself helped make the giants even bigger - that is also a subsidy to the big boys (see this).

The monopoly power given to the big banks (technically an "oligopoly") is a subsidy in other ways as well. For example, Nobel prize winning economist Joseph Stiglitz said in September that giants like Goldman are using their size to manipulate the market:
"The main problem that Goldman raises is a question of size: 'too big to fail.' In some markets, they have a significant fraction of trades. Why is that important? They trade both on their proprietary desk and on behalf of customers. When you do that and you have a significant fraction of all trades, you have a lot of information."

Further, he says, "That raises the potential of conflicts of interest, problems of front-running, using that inside information for your proprietary desk. And that's why the Volcker report came out and said that we need to restrict the kinds of activity that these large institutions have. If you're going to trade on behalf of others, if you're going to be a commercial bank, you can't engage in certain kinds of risk-taking behavior."
The giants (especially Goldman Sachs) have also used high-frequency program trading which not only distorted the markets - making up more than 70% of stock trades - but which also let the program trading giants take a sneak peak at what the real (aka “human”) traders are buying and selling, and then trade on the insider information. Seethisthisthisthis and this. (This is frontrunning, which is illegal; but it is a lot bigger than garden variety frontrunning, because the program traders are not only trading based on inside knowledge of what their own clients are doing, they are also trading based on knowledge of what all other traders are doing).

Goldman also admitted that its proprietary trading program can "manipulate the markets in unfair ways". The giant banks have also allegedly used their Counterparty Risk Management Policy Group (CRMPG) to exchange secret information and formulate coordinated mutually beneficial actions, all with the government's blessings.

In addition, the giants receive many billions in subsidies by receiving government guarantees that they are "too big to fail", ensuring that they have to pay lower interest rates to attract depositors.

The government's failure to rein in derivatives or break up the giant banks also constitute enormous subsidies, as it allows the giants to make huge sums by keeping the true price points of their derivatives secret. See this and this.

Toxic Assets
The PPIP program - which was supposed to reduce the toxic assets held by banks - actually increased them, and just let the banks make a quick buck.

In addition, the government suspended mark-to-market valuation of the toxic assets held by the giant banks, and is allowing the banks to value the assets at whatever price they desire. This constitutes a huge giveaway to the big banks.

As one writer notes:

By allowing banks to legally disregard mark-to-market accounting rules, government allows banks to maintain investment grade ratings.
By maintaining investment grade ratings, banks attract institutional funds. That would be the insurance and pension funds money that is contributed by the citizen.
As institutional money pours in, the stock price is propped up ....

Mortgages and Housing
PhD economists John Hussman and Dean Baker (and fund manager and financial writer Barry Ritholtz) say that the only reason the government keeps giving billions to Fannie and Freddie is that it is really a huge, ongoing, back-door bailout of the big banks.

Many also accuse Obama's foreclosure relief programs as being backdoor bailouts for the banks. (See thisthis and this).

Foreign Bailouts
The big banks - such as JP Morgan - also benefit from foreign bailouts, such as the European bailout, as they are some of the largest creditors of the bailed out countries, and the bailouts allow them to get paid in full, instead of having to write down their foreign losses.

Wall Street inquiry expands beyond Goldman Sachs

New York's attorney general subpoenas eight banks and three ratings firms on their actions involving mortgage-backed securities.

Nathaniel Popper, Los Angeles Times

May 14, 2010

Reporting from New York

The investigation that has been focused on Wall Street titan Goldman Sachs Group Inc. is widening to include questionable business practices of several other major banks.

New York Atty. Gen. Andrew Cuomo subpoenaed eight banks and three ratings firms late Wednesday, seeking information on how the banks may have tried to influence the ratings of mortgage-backed securities that eventually lost value with the housing market collapse.

The banks on Thursday confirmed receiving the subpoenas and said they would cooperate.

The investigation by New York's top prosecutor came as the Wall Street Journal reported that federal investigators were expanding the inquiry into potential criminal activities at a number of the biggest banks, including Goldman, Morgan Stanley, JP Morgan Chase & Co. and UBS.

Several of these banks said they were unaware of any criminal investigation and had not been contacted by the U.S. attorney's office.

The Journal reported in late April that Goldman was facing a criminal probe by the Justice Department. That report sent Goldman's shares down 9.4% on April 30. Earlier this week Morgan Stanley, too, was said to be under criminal investigation by the federal government.

On Thursday, banking stocks were broadly lower, but the declines generally weren't much worse than the market drop as a whole. An index of financial stocks in the Standard & Poor's 500 fell 1.7% for the day, while the S&P 500 lost 1.2%.

The investigations highlight how mortgage-backed securities, such as collateralized debt obligations, have become the central legal issue in the financial meltdown.

But Wall Street's relatively muted reaction to Cuomo's inquiry suggests that the focus on the financial industry is no longer a surprise.

"This was something that people should have been expecting since the news about Goldman came out," said Michael Wong, a financial industry analyst with Morningstar. "It would be naive to think that Goldman was the only investment bank that engaged in this type of activity — or that it had activities that were so different than its peers."

Goldman was sued last month by the Securities and Exchange Commission, which alleged that Goldman had not told investors that a security the bank was selling had been designed by someone betting against it.

According to industry sources, the SEC sent out requests last year to most of the major banks requesting information about how they designed and marketed collateralized debt obligations — a security created by bundling together parts of different mortgages.

No other companies have been charged by the SEC, but Goldman was not the biggest creator of the debt obligations. Most rankings from the years before the crisis put Citigroup, Merrill Lynch, Deutsche Bank and Credit Suisse as the largest under writers of the security.

Federal prosecutors typically investigate cases being looked at by the SEC. But a criminal indictment would require a much higher standard of proof than a civil lawsuit like the one against Goldman, and many legal experts are skeptical of whether prosecutors could bring criminal charges.

"It is highly unlikely with the level of thought and sophistication and review that went into the creation of these instruments and their sale, that we will see criminal cases," said Jacob Frenkel, a Maryland lawyer who used to be in the SEC's enforcement division.

The more pressing matter for most banks will be the investigation by Cuomo's office, which sent subpoenas seeking documents to Goldman, Morgan Stanley, Citi, UBS, Credit Suisse, Deutsche Bank, Credit Agricole and Bank of America Corp., which now owns Merrill Lynch, as well as the three major credit ratings agencies.

In the past, big pension funds and institutional investors have sued ratings firms for providing high grades to securities that ended up tanking in value. Cuomo's probe is the first to look at whether the ratings agencies themselves may have been influenced by the banks that sold the securities.

The investigation is looking into whether the banks "manipulated" the ratings agencies into providing undeservedly high ratings, according to people close to the investigation. The probe is also looking into whether the banks accurately represented the mortgages that were packaged together in the securities.

The subpoenas did not mention any specific deals or individuals. Bank of America, Credit Suisse, Deutsche Bank as well as ratings firms Moody's Investors Service and Fitch Ratings all said they plan to cooperate with the attorney general. The other banks and Standard & Poor's, the third rating firm subpoenaed, did not comment.

"We believe that the Bank acted appropriately and will cooperate with the authorities to substantiate our position," said Ted Mayer, a spokesman for Deutsche Bank.

The ratings firms were the subject of a congressional hearing late last month, soon after Goldman executives came under fire at a hearing about the bank's marketing of the securities.

On Wednesday, the Senate approved an amendment to pending financial legislation that would create a federal regulatory board to oversee credit ratings agencies.

U.S. Corps Dodge $60 Billion in Taxes

Tyler Hurst swiped his debit card at a Walgreens pharmacy in central Phoenix and kicked off an international odyssey of corporate tax avoidance.
Hurst went home with an amber bottle of Lexapro, the world’s third-best selling antidepressant. The profits from his $99 purchase began a 9,400-mile journey that would lead across the Atlantic Ocean and more than halfway back again, to a grassy industrial park in Dublin, a glass skyscraper in Amsterdam and a law office in Bermuda surrounded by palm trees.
While Forest Laboratories Inc., the medicine’s maker, sells Lexapro only in the U.S., the voyage ensures most of its profits aren’t taxed there -- and they face little tax anywhere else. Forest cut its U.S. tax bill by more than a third last year with a technique known as transfer pricing, a method that carves an estimated $60 billion a year from the U.S. Treasury as it combines tax planning and alchemy. (See an interactive graphic on Forest’s tax strategy here.)
Transfer pricing lets companies such as Forest, Oracle Corp., Eli Lilly & Co. and Pfizer Inc., legally avoid some income taxes by converting sales in one country to profits in another -- on paper only, and often in places where they have few employees or actual sales.
After an economic bailout in which the U.S. government lent, spent or guaranteed as much as $12.8 trillion, the Obama administration faces a projected budget deficit of $1.5 trillion this year. In February, the administration said it would target some of the techniques companies use to shift profits offshore -- part of a package intended to raise $12 billion a year over the coming decade.
Losing $60 Billion
That’s only about a fifth of the $60 billion in annual U.S. tax revenue lost to thousands of companies’ income shifting, according to a study published in December in the National Tax Journal by Kimberly A. Clausing, an economics professor at Reed College in Portland, Oregon.
The lost revenue could pay the federal government’s share of health coverage for more than 10 million uninsured Americans, such as Hurst -- more than a third of the people who will gain insurance under the health-care overhaul passed in March. The administration’s proposed tax on certain financial institutions would take almost seven years to generate $60 billion.
“Transfer pricing is the corporate equivalent of the secret offshore accounts of individual tax dodgers,” said Sen. Carl Levin, a Michigan Democrat and chairman of the Senate’s Permanent Subcommittee on Investigations, in a statement to Bloomberg News. Levin has overseen hearings on tax shelters including those sold to wealthy people by KPMG LLP. “Now that progress has been made in addressing offshore tax abuse by individuals, transfer pricing is an issue that deserves scrutiny.”
Tea Party Signs
The anti-tax activists of the national Tea Party movement haven’t put transfer pricing on signs in their demonstrations, yet it deserves attention, said Mark Skoda, chairman and founder of the Memphis Tea Party.
“I find the issue of corporations paying no tax or little tax in the United States, when the majority of their operations are here, problematic,” Skoda said in an interview. “The problem is that this is sort of the level of micro that people don’t look at.”
The trek taken by Forest’s profits on Hurst’s $99 purchase involves a corporate structure nicknamed “the Double Irish,” registered offices that occupy no real estate and a set of U.S. rules that one tax attorney calls “unenforceable.” It provides a case study in how U.S. companies use transfer pricing to avoid paying taxes.
‘Seems Ridiculous’
“The fact the profits aren’t reported in the U.S. seems ridiculous,” said Hurst, 30, a self-employed marketing consultant, after hearing about the journey his money was undertaking. He began using Lexapro to counteract years of mood swings, including depression and anxiety he started experiencing in college, he said.
On April 15, the deadline for Americans to file their personal tax returns, the Internal Revenue Service said it would add new agents, attorneys and economists to ensure companies are following the rules for transfer pricing. The United Nations set up a panel in October to devise guidelines for the practice in developing countries.
“If multinationals cannot be prevented from shifting profits to low-tax jurisdictions, then it becomes impossible to maintain the domestic corporate tax base,” said Reuven S. Avi- Yonah, director of the international tax program at the University of Michigan Law School in Ann Arbor. If that bleeding can’t be stanched, “we might as well abandon the income tax.”
$1 Trillion Offshore
U.S. companies amassed at least $1 trillion in foreign profits not taxed in the U.S. as of the end of last year, according to data compiled by Bloomberg. That cumulative total, based on filings by 135 companies, increased 70 percent over three years, from $590 billion in 2006.
While some of the offshore earnings reflect sales abroad, much of the growth results from expanding use of transfer pricing, said Martin Sullivan, a tax economist who formerly worked for the Treasury Department and Arthur Andersen LLP.
The system allows for creating paper transactions between subsidiaries of the same company to allocate expenses and profits to selected countries. For instance, when technology firms license their patents to offshore subsidiaries in low-tax countries, profits from sales overseas are booked to the foreign units, not the U.S. parents. The tax savings add to profits.
“A very significant part of this accumulation of profits offshore is the artificial shifting of profits using transfer pricing,” said Sullivan, now a contributing editor to the trade publication Tax Notes. “There’s been a significant increase in its aggressiveness over the past decade.”
Like Churchill Said
Criticisms of transfer pricing “remind me of what Churchill said about democracy: It’s the worst system -- except for all the others,” said Karl L. Kellar, a partner at Jones Day in Washington, who advises companies on their taxes and who formerly worked for the IRS and the U.S. Justice Department.
Companies try to extract as much tax benefit as possible from transfer pricing to protect shareholders’ interests, proponents say, particularly in the U.S., which imposes one of the world’s highest tax rates on corporate income, 35 percent.
Frank J. Murdolo, Forest’s vice president of investor relations, declined to comment on the company’s tax planning.
The Journey Begins
It’s about 2,100 miles from the Phoenix Walgreens, operated by Walgreen Co., to Forest’s corporate headquarters on Third Avenue in New York. There, Howard Solomon, the drugmaker’s chief executive officer, became interested in treating mood disorders as he watched his son, writer Andrew Solomon, struggle with depression in the 1990s.
He led Forest to Lexapro, whose sales last year ranked behind only Pfizer’s Effexor and Eli Lilly’s Cymbalta among antidepressants, according to IMS Health Inc., a health-care data provider in Norwalk, Connecticut. Since its 2002 debut, Lexapro has generated $13.8 billion in sales, according toGary Nachman, an analyst for Leerink Swann LLC, in New York. The drug accounted for 58 percent of Forest’s sales for the fiscal year that ended March 31.
Forest declined to discuss how much it received from the $99 that Hurst paid for his Lexapro. For top-selling prescription drugs, the retailer would keep about $12, and $2 would go to a drug wholesaler, according to Helene Wolk, a health-care distribution analyst at Sanford C. Bernstein & Co. in New York. While the amounts differ for purchases covered by health insurance, the proportions are similar, Wolk said.
To Ireland
Of the $85 left for Forest, most doesn’t stay on Third Avenue for long. It heads first to Ireland, where workers in lab coats and goggles make and test the medicine in a low-slung, off-white factory near a soccer pitch on Dublin’s north side. A rock the size of a Smart car rests beside the parking lot, inscribed with one word in bright blue letters: “Forest.”
This subsidiary, called Forest Laboratories Ireland Ltd., sells Lexapro to its U.S. parent, according toDan L. Goldwasser, a Forest board member and an attorney with Vedder Price PC in New York.
That transaction is at the heart of transfer pricing: With each tablet Forest buys from the Irish unit, it shifts profits to Ireland, where corporate income is taxed at rates between 10 percent and 12.5 percent, compared with 35 percent in the U.S.
“Part of the object is to generate some of the profit in Ireland,” Goldwasser said.
Undisclosed Price
The company won’t disclose what it pays the Irish subsidiary for Lexapro or other medications made there. Tax accounting analysts say they can’t calculate the pill’s precise price either.
Overall, Forest’s Irish operations, which employ about 5 percent of its 5,200 workers, reported $2.5 billion in sales during fiscal 2009, the most recent year for which figures are available. That equals about 70 percent of the parent company’s $3.6 billion in net sales. Lexapro alone generated $2.3 billion in revenue in 2009, according to company filings.
Scores of U.S. pharmaceutical and technology companies have set up similar operations in Ireland, lured by an educated workforce, political stability and access to European markets, as well as low taxes, said Alan Mahon, a spokesman for the Irish Department of Finance.
“Ireland’s 12.5 percent corporation tax rate has become an international ‘brand,’” he said.
Exporting Intellectual Property
U.S. tax laws have sought to regulate transfer pricing in various forms since 1921. Treasury Department regulations in 1968 created standards for pricing inter-company transactions. Thousands of pages of rules have followed, and the tax code was amended in 1986 because of concerns that companies were shifting profits from the U.S.
For U.S. regulators, the key questions in transfer pricing are whether the parent pays too much to its offshore subsidiary or whether the subsidiary pays too little to its U.S. parent. Treasury Department regulations require “arm’s length” prices, or the amounts that would be paid between unrelated parties.
Those rules are “based on a fiction,” said Michael C. Durst, special counsel at Steptoe & Johnson LLP, in Washington, who advised companies on transfer pricing for 15 years and has emerged as a leading critic of the system.
Many of the transfer pricing transactions between a U.S. parent and its offshore units would never take place between unrelated parties, Durst said. So it’s often impossible to compare the prices paid in those deals to prices in real-world transactions between separate companies, he said.
‘Unbelievable Scandal’
“As a result of resting on this basic fallacy, transfer pricing rules have for many years been unenforceable,” said Durst, who formerly worked for PricewaterhouseCoopers LLP and the IRS.
U.S. Sen. Byron Dorgan, a North Dakota Democrat, calls transfer pricing “an unbelievable scandal.” He favors scrapping the rules in favor of a system that allocates profits as most U.S. states with a corporate income tax do. That method is based on factors including sales, number of employees and property in a particular state. Enforcement of the current rules is “impossible to do,” he said.
“It’s the equivalent of asking the Internal Revenue Service to connect the ends of two different plates of spaghetti,” Dorgan said.
Forest derived the undisclosed price that it pays its Irish unit for Lexapro from a 2001 arrangement the parent company struck with Daiichi Sankyo Co., Japan’s third-largest drugmaker, according to Goldwasser, the board member. That deal was to co- promote the hypertension medication Benicar, he said.
‘That’s Life’
“You’re attributing to Forest Ireland more bargaining power than probably it actually had, but, you know, that’s life,” Goldwasser said.
A crucial step in calculating where a drugmaker’s profits belong under transfer pricing is determining who owns a drug’s patents for tax purposes, said Durst, the corporate tax attorney. While Forest’s Irish subsidiary controls Lexapro’s patents for the U.S. market, it didn’t come up with the formula. Forest licenses the use of those patents from H. Lundbeck A/S, a Danish pharmaceutical company. The Irish unit paid for the drug’s U.S. clinical trials, Goldwasser said.
The IRS claimed in 2007 that Forest didn’t adequately value its U.S. marketing operations, allocating too much in profit to its Irish subsidiary, according to a person familiar with the matter. That person asked not to be identified because he wasn’t authorized to discuss it publicly. The dispute involved profits from another antidepressant, Celexa, in 2002 and 2003, according to the person and filings by Forest.
Rival Economists
Such disagreements sometimes grow to involve hundreds of pages of studies by rival economists over comparatively small differences in costs that cumulatively add up to hundreds of millions of dollars.GlaxoSmithKline PLC, the U.K.’s largest drugmaker, settled a transfer pricing case with the U.S. in 2006 for $3.4 billion. Since December, the U.S. has lost two court cases with Silicon Valley companies: a $24.3 million dispute with Xilinx Inc., a programmable chipmaker, and a $545 million case withSymantec Corp., a software company.
In Forest’s case, the IRS sought an additional $206.7 million in tax, according to the company’sdisclosures. Forest said in November it agreed to pay an undisclosed amount that “did not have a material impact” on its results.
Beginning in 2005, the company found a way to reduce its taxes even further by sending most of its Lexapro profits from Ireland to Bermuda.
‘The Double Irish’
On advice from Ernst & Young, Forest Laboratories Ireland reorganized that year, dropping the country from its name. The newly dubbed Forest Laboratories Holdings Ltd. established a registered office in Hamilton, Bermuda, declaring the island its tax residence. This unit took control of licensing the patents.
A second subsidiary in Ireland inherited the old name. It handled the manufacturing, sublicensing the rights to the patents, according to a corporate disclosure and an internal Forest flow chart tracing the arrangement that was reviewed by Bloomberg.
The change helped the Irish subsidiary cut its effective tax rate to 2.4 percent from 10.3 percent the year before the reorganization, according to its annual reports. It did so by deducting from its taxable income the fees that went to Bermuda, which has no corporate income tax. Charlie Perkins, a spokesman for Ernst & Young, one of the so-called Big Four accounting firms, declined to comment on its work for Forest.
International tax planners have a nickname for the type of structure the drugmaker adopted: the Double Irish.
“Double Irish More than Doubles the Tax Savings,” was the headline in a 2007 issue of the trade publication International Securitization & Finance Report over an article describing the model by a pair of U.S. tax attorneys, Joseph B. Darby III and Kelsey Lemaster.
Layover in Amsterdam
Ireland faces its own budget gap after real estate values collapsed. The deficit, pegged at 14.3 percent of gross domestic product last year, represented the biggest shortfall of any member of the 27-nation European Union, according to data released in April by Eurostat, the statistics office of the EU.
To avoid another Irish tax, Forest’s profits don’t fly direct to Bermuda. They have a layover in Amsterdam.
Fees paid to the Bermuda unit pass through yet another subsidiary, Forest Finance BV in the Netherlands, according to the internal Forest document, Dutch corporate records and a person familiar with the transaction.
That route bypasses a 20 percent Irish withholding tax on certain royalties for patents, according to Richard Murphy, a U.K. accountant who worked on similar transactions and is director of Tax Research LLP. The structure takes advantage of an exemption from the levy if payments go to a company in another EU member state, Murphy said.
Passing Through
Forest established its Dutch company in July 2005, two months before its Irish subsidiary got permission from Bermuda regulators to conduct business. The Amsterdam unit operates largely as a conduit, records show. In 2007, Forest Finance collected $1.19 billion in licensing income and paid out 99.6 percent of it in licensing expense, according to its annual report.
The Dutch company lists its office at an Amsterdam building used by Fortis Bank Nederland NV, the lender nationalized in 2008 by the Dutch government. Forest has no employees there, said a receptionist at Intertrust Group Holding SA, a business that manages financial records for companies. The receptionist wouldn’t give her name. Intertrust was sold in January by Fortis Bank to a private equity firm.
The Dutch Channel
The Netherlands has more than 13,000 such entities “established by foreign multinational corporations for the purpose of channeling financial assets from one country to another,” according to published research by the Dutch Central Bank. More than 12.3 trillion euros ($15.5 trillion) flowed in and out of them during 2008, the Dutch Central Bank said.
Forest’s income tax savings from international operations almost doubled after its Irish-Dutch-Bermudan reorganization took hold. In fiscal year 2007, the company’s effective tax rate dropped by 21.8 percentage points, or $155 million, because of the effect of foreign operations, according to U.S. securities filings. In 2009, the international tax benefit lopped 18.9 percentage points, or $183 million, off Forest’s income tax bill.
International tax benefits boosted Forest’s net income in 2009 by 31 percent, according to an analysis of its tax footnotes by Robert Willens, president of Robert Willens LLC, a consulting firm that advises investors on tax issues.
‘Place of Business’
Even though Forest described its Bermuda office as the Irish subsidiary’s “principal place of business” in a 2008 court filing, it has no employees on the island. The closest it comes to an actual presence is its registered office at Milner House, at 18 Parliament Street in Hamilton, a beige building nestled among the pastel structures of the island’s main commercial area.
There, Coson Corporate Services Limited, part of law firm Cox Hallett Wilkinson, provides “corporate administrative services” for Forest Laboratories Holdings, according to Jeannette Monk, who identified herself as the company’s corporate administrator. Asked whether Forest had any employees there, she said, “This is a law firm.”
It’s also the last port of call for about two-thirds of the profits Forest derived from sales of Lexapro and its other drugs in 2009. U.S. corporations can avoid taxes on such overseas profits indefinitely, until they decide to bring the earnings back home.
The Bottom Line
Unlike most deferred taxes, future levies on most foreign earnings don’t count against income in reports to shareholders, said Michelle Hanlon, an associate professor of accounting at the Massachusetts Institute of Technology’s Sloan School of Management.
So lower taxes from earnings kept overseas go straight to the bottom line, she said, and U.S. companies rarely repatriate significant portions of that income. They’re permitted to use it in overseas operations or certain investments, or to let it sit as cash in bank accounts, Hanlon said.
An exception came in 2004 when Congress enacted a one-time break allowing companies to bring back their earnings at an effective tax rate of 5.25 percent, less than one-sixth the top corporate rate. As a result, 843 corporations brought $362 billion to the U.S., with $312 billion qualifying for the tax break, according to the IRS. Forest returned $1.2 billion to the U.S. under the legislation.
While it remains offshore and shielded from federal income taxes, most of the $1 trillion in foreign profits for U.S. multinationals cannot be used in the U.S. That doesn’t make Tyler Hurst very happy about his Lexapro transaction.
“If I’m purchasing it from Walgreens two blocks away, that money isn’t going to anything local, or anything national,” he said. “I’m giving my money to Ireland.”